What exactly is Per Diem?

Per diem is a portion of your compensation that is considered as reimbursement and as such is not taxed. I t effectively lowers your tax burden, but there are also disadvantages such as lowering your earnings and thus lowering your social security later in life.

 

What does PAM charge you for this>they ALL charge for it.

Per diem lowers your taxable income by paying you a "non taxable road allowance" as it is deemed a reimbursement for road expences. The key words are "lowers yiur taxable income" which means PAM doesn't contribuite as much to your Social Security because your income is lower. It also means your workmans comp is lower if you have a claim.

Most drivers look @ per diem as a negative and employers look @ per diem as a positive>That should tell you something.

 

And as if that's not bad enough, many carriers actually charge an "administrative fee" to the driver for the "privilege" of participating in the per-diem plan. This is usually hidden and very hard for the driver to figure out, even with detailed pay stubs, and hardly discussed by the carrier's payroll dept. at orientation (pay close attention). Stay away from per-diem, and itemize at the end of the year (hotels, standard meal allowance when away from home, and all other driver related expenses, portion of cell phone, etc.). You'll always come out well ahead, bottom line.

 

it effectively raises your net income by paying less in tax's which is nice in the short term, but in the long term it makes it hard to qualify for home loans(the per diem portion likely wont be counted as part of your income because it is a reimbursement), reduces your social security income if you live that long and reduces your aflac pay if you get hurt or disabled...overall its a negative for employee's, positive for any company.

if it isnt mandatory i would opt-out, as previously stated you can get the same tax benefit by itemizing and taking the standard deduction for meals and expenses. the companies usually take around 2 cpm for per diem, so they make millions on this...by lowering their tax obligation and paying you less.

 

We have non reimbursable business expenses that are considered deductions when you do your taxes. The per diem is setting a flat percentage rate established by the company. If you do not itemize your tax deductions and take a standard deduction it may save you some money. If you itemize your deductions the percentage is probably low.

 

I always assumed this was understood by new drivers, but when you say it this way ... it makes me wonder. Just to clarify, ALL company drivers that are not on a per-diem plan, MUST properly itemize at tax time (and take the legal standard daily meal allowance, as well as other hotel and other driver related expenses to lower their taxable income) or else they are giving uncle sam a huge amount of money they don't rightfully owe.

That said, again, stay away from per-diem if possible and itemize your driver related expenses and you'll come out ahead financially in the end. But you can't do both.

 

I learned how important deductions were when I started doing my own taxes. I have almost double the standard deduction every year. Use an online program like h and r block and it isn't that hard.

 

Google "driver meal allowance" to begin with to get you started. You don't have to save meal receipts if you have logs to substantiate the standard meal allowance number of days, but you do need to have receipts for the other driving job related stuff in the event of a future audit and to substantiate your numbers.